Sunday, October 26, 2008

Banking: Advice to depositors

Written by Dele Sobowale

Sunday, 26 October 2008

Hereditary bondsmen, know ye not who must be free must strike the blow? —Lord Byron, 1788-1824.

NIGERIANS never cease to amaze me. Since the series on banks started, I had received nothing less than 1,300 telephone calls and text messages; virtually all complaining about what they regard as maltreatment by their banks. A few have been quite legitimate allegations given the provisions of the Guide To Bank Charges.

Some have asked pointedly, but others have asked me indirectly what can be done. Let me be brief. Workers did not start to get a fairer deal until labourers started to form unions. Now, there are shareholders associations hopefully looking after shareholders interests. The banks in Nigeria are a cartel facing individual depositors.

In that contest, the victor is known even before it starts. As Ernest Hemmingway told us, "A man alone hasn't got a chance". The only way depositors can have power is to form groups. I thought that was clear. So go and gang up too. But choose your leaders carefully.

Latest on NSE: After weeks of utter bewilderment by the leaders of the Nigerian Stock Exchange, we had an announcement of N600 billion bail out. It turned out to be a mirage. Some banks will soon need bailing out themselves as their overseas exposures turn sour and remittances by Nigerians from across the globe drop significantly. At any rate, N600 billion will buy very little and surely nobody will borrow at 25% to buy shares anymore. They should forget it. Anything that sounds too good to be true, as the NSE's bubble economy was, is probably not true.Technocrats for the guilottine

For every folly of their princes, the [people] feel the lash — Horace, 65-8 B.C.

PERHAPS, we can postpone killing all the lawyers; they will be roasted in hell anyway. Hanging the professors can also wait; at least, they work hard and are badly paid - except those who get into government and become ministers. The ministers we need to dispose of right away.

There is a more dangerous group of people than even those; as your presido has just discovered. You have seen them on television and newspapers; they have been appointed as ministers and special advisers to presidents or chief economic advisers, a few have become governors of Central Bank and quite a handful have been captains of industry.

Those in the private sector have practiced Nigeria's brand of parasite or rogue capitalism.They generate one percent of foreign exchange earnings and collect 15 percent of foreign exchange generated from crude oil. Collectively, members of this dangerous cult are called technocrats.

But, before going into full discussion on why the technocrats in Nigeria deserve to have their heads chopped off, as soon as possible, let me let you into a secret. The global recession, now underway, was the handiwork of technocrats worldwide - including their Nigerian members. Now, billions of people are going to feel the lash of hunger, malnutrition, the shame of joblessness and all the maladies associated with broken homes and increasing crime rates.

And all these will occur because the technocrats fouled up.Professor Joseph Stiglitz, mentor to our former "Madam Due Process", now with the World Bank (umh!), was one of the Harvard University professors who produced the large number of global technocrats who, in turn, invaded the world, preaching the gospel of unbridled capitalism and globalization of markets as an indispensable means of spreading wealth.

Today, the integrated global economy they have created is heading towards total collapse because of the sins of a few large financial houses. (There is a lesson in that for those who think creating mega banks constitutes an end in itself. When the Agbonmagbe Bank (father to WEMA) went under in the middle of the last century, it took less than N1 million with it.

Today, depositors of Societe General or Savanah Bank have, at least, N10 billion atthe bottom of the rat hole the banks have entered. So much for bigness as a guarantee of safety). At any rate, Lehman Brothers alone, before the crash, could have bought all Nigeria's mega banks and still have money left for all those in Benin Republic; yet, it went under right in front of our eyes.

There is no economic calamity that has befallen the world's economy that does not have the finger prints of technocrats on it. Thus, when a news report announced that Yar'Adua was shopping for technocrats, I thought the time had come to speed up the purge of that class of social menace. It is better to get them before they do us in. As a matter of fact, they have already done enough damage.

Yar'Adua would be better to go shopping for witch doctors. Unfortunately, we missed a chance last week, to grab many of them at once and send them to the axe man before they escape abroad. By the time you start reading this, the technocrats, who have taken the Nigerian Economic Summit Group, NESG, hostage would have wound up their fourteenth talkfest. One thing is certain- they would have passed another communiqué full of the usual claptrap masquerading as suggestions to move the way forward. President Yar'Adua has been billed to deliver the keynote address.

But, I doubt if the NESG consulted the president's doctors (assuming they have not also taken the oath of secrecy) to find out if Yar'Adua can sit down for four hours to listen to a lot of hot air. So the president might not even attend. He is probably still working on his cabinet and the two budgets -2008 and 2009 simultaneously.

After all, that, we were told, was what kept him from attending the United Nations Conference where other heads of government were present. If he can ignore his equals and even superiors on the world stage, what is a bunch of salad eaters calling themselves NESG to him? At any rate, he probably won't miss anything. And the communiqué will probably join all the other stuff gathering dust somewhere in Aso Rock.

Still, the technocrats are dangerous and should not be underestimated. They have got some of their camp followers into top positions in every government where they proceed to reek havoc. Certainly, you remember El-Rufai, a technocrat, who became Director General of the Bureau of Public Enterprises. Given that power, he was able to hand over NITEL to one Pentascope.

At the time NITEL was making about N1 billion a year, a figure government considered inadequate. By the time Pentascope was through with NITEL, it had lost N50 billion. From time to time, the young man tells anybody who cares to listen to him that "I have no regrets." That's a technocrat for you. His replacement and current technocrat in residence has been rumoured to be trying to sell the NNPC. Again, that is a technocrat for us. And if you don't believe me, then follow me down memory lane.

At 64+, I am an old man in a country where 49 is life expectancy. I am on injury time. But, as the saying goes, "when an old man dies, you lose a library." This old head contains a library full of the history of the follies of these so-called technocrats in government.

Back in the early 1970s, a few young technocrats were in charge of the Federal Government. They were called "super-permanent secretaries or super perm secs, SPS". They were ably supported by others in other areas of government. Although, we had a military government, none had been to university - not even the "know-it-all" at Ota. So they allowed themselves to be guided by the well-educated SPS who attended Oxford, Cambridge and University of Ibadan, which, at the time, was every bit as good as Cambridge - until those running governments since 1966 got hold of it. They were called visitors.

They should never have visited and the universities would have been better for it. What sort of visitor is that who wrecks the joint? One of such highly confident young officers was Udoji. He would go down in history as the man who was called upon to conduct a salary review for the public service in Nigeria. Let me not bore you with tedious history. After a lot of work, the Gowon administration announced the Udoji awards as a result of which salaries and entitlements for workers were increased fourfold.

That, by itself, would have triggered hyperinflation which would soon make nonsense of the awards. But, each worker was then paid nine months arrears of the difference between the new and the old scales. Not contented with that next step in "squandermania", the government also allowed anybody who wanted to retire from service after ten years to go - with his full entitlements. Many promptly left, leaving the civil service a haven for novices. Now, you can see what damage technocrats can do.

Because we have always been poor, most Nigerians sang praises of government. The absurd demand for Gowon to "Go on with one Nigeria", after ruling for almost nine years, was deafening. Technocrats approved. All sorts of reasons were given why the new measure will soon place Nigeria among the world's leading economy.

With their pockets full of freshly mint naira, Nigerians went on a spending spree from Lagos to London and, soon, the nation was flooded with imports. Time magazine, in one edition, proclaimed "If you have anything to sell, Nigeria is the place to go. That is an economy that is bursting at the seams."

And indeed, the economy was booming as it never did before and has not done ever since. At one point, Nigeria was ranked 37th in the world in GDP. For the unwary, it appeared that the good times would last for ever. But, there were the voices pointing out that with our sudden over-dependence on crude oil that our prosperity might not last.

They were ignored. New factories, generally ill-considered, sprang up in Lagos, Kano, Jos, Kaduna, Port Harcourt, virtually all of which required imported raw materials and spare parts to function. Management was also thin on the ground and the new owners had not acquired the discipline of entrepreneurs in Europe and America. But, again, let's go on- without Gowon this time.

By, 1978, a "rich" and debt-free Nigeria was already discussing the possibility of asking the International Monetary Fund for a loan. Again, the technocrats got into the game. They then invented a term which, at the time, was mesmerizing. According to them, Nigeria was under-borrowed.

In plain terms, it meant that our country had no debt and that, to the technocrats, was not good enough. In short order, General Obasanjo's government proceeded to ensure that Nigeria was no longer under-borrowed. It took a loan of $2.8 billion from the international community, with assurances to Nigerians that the loan would be easily repaid. What was done with the $2.8 billion remains a mystery till today; although, Fela Anikulapo, the original Abami-Eda, gave us some idea through his immortal music.

More loans followed under the civilian regime of Shehu Shagari by Federal and State governments some of which are still being liquidated today. By 1982, Chief Obafemi Awolowo was already warning the nation that the economy was headed for a crash. The chief economic adviser to Shagari, a professor of economics and a technocrat, now a traditional ruler, called Awolowo a prophet of doom. The technocrats called him a rumour monger. But, the economy went into recession as predicted by that non-technocrat; Shagari was pushed out by Buhari/Idiagbon/Babangida.

Later, with the economy still in doldrums, IBB shoved Buhari aside and became the first military President of Nigeria in 1985. A few months after, IBB rolled out the Structural Adjustment Programme, SAP, which has, in one way or another, guided our economic policy ever since and which has ruined us more than any other economic policy since 1960. Yet, it was a technocrats delight. Unemployment went up to 40 percent; capacity utilization was as low as 38 percent and the currency became like tissue paper. From seventy kobo to the dollar, it went overnight to three naira to the dollar and today, it is N120 to the dollar.

Poor implementation

Yet, the technocrats applauded. By 2000, the World Bank was admitting that "some mistakes" were made in the way SAP was implemented. Yet, till today, none of the technocrats had admitted any error; a very costly error in terms of life and means of livelihood. At this point, there is a need to provide the names of some of the proponents of SAP. The only exception, and his was a half-apology, was Chief Falae, who, as presidential candidate in 1999, found SAP an albatross round his neck and tried to shift the blame to poor implementation by IBB's administration.

Chief Ernest Shonekan was the undisputed leader of the Organised Private Sector, OPS, at the time and a technocrat and he stands proxy for the group which earned less than 1% foreign exchange for Nigeria while consuming about 42% of it. Dr, now Professor, Pat Utomi represented the "card-carrying intellectuals" as well as the media wing of what for want of any name I will call The Association of Technocrats, the governor of Central Bank, now dean Alhaji Ahmed, as well as all the bankers were all for it. Every member of IBB's cabinet and not just the ministers of finance (he kept changing them -Okongwu, Alhaji Alhaji, Chief Olu Falae, Kalu Idika Kalu) but every minister either believed in the SAP or, at least, pretended to.

The programme itself, which was a poor carbon copy of what the International Monetary Fund wanted to impose directly, was advertised as a "home grown" initiative in answer to our needs. But, the content belied the words. It was a free market document such as the IMF and the World Bank were foisting on developing countries, especially those heavily indebted as Nigeria was, in order to have their debts rescheduled and to have access to more loans.

Let us pause at this point and summarise what actually happened in practical terms. Within the relatively short time of thirteen years, Nigeria had moved from the position of a net creditor to the world, 37th in GDP, to one of the most highly indebted nations on earth and occupying a position close to 110 on GDP scale.

The original $2.8 billion had accumulated interest which, in turn, had been capitalized and accumulated interest so that, by 1990, it was clear that only the miracle of another crude oil windfall could save us. But, every single step taken by the federal government had been made on the basis of advice offered by technocrats; the policies have often been implemented by technocrats and the lack of growth of the Nigerian economy had been the result of their interventions in government.

The names of those attending the 14th NESG might be different from those of the first, second or third, but they are clones of those who for years have held us by the jugular bending economic policies for the benefit of the few at the expense of the many. The capitalist model which they have held aloft has finally shown its inherent weaknesses; starting with America.

Among the reasons it had taken so long for the world to arrive at this point are: strong institutions; active and incorruptible judiciaries; where they exist, strict regulatory authorities; creativity and good governance -at least comparatively. Instead technocrats have forced Nigerian governments to accept an economic policy which our weak governance and lack of institutions cannot support. Let me give two examples.

If China or Malaysia or Poland imposes import prohibition on any item, it is unlikely that you would find it openly displayed for sale in any market. Thus, the market for it would be very small and it will be relatively expensive.

Even the village idiot knows that contraband can be found in any open market in Nigeria. As we are approaching Christmas, bangers, which were reportedly banned several years ago are exploded even inside police barracks.

At least I witnessed one last week. Similarly, unscrupulous Nigerian business men and women can travel to India or Taiwan and have substandard products manufactured for them for distribution in Nigeria. But no Taiwanese business man or woman will accept substandard cocoa from Nigeria for manufacture of goods for consumption in his own country.

Corruption is everywhere, admittedly. But, who has ever heard of a Frenchman or Indian, or America, or Brazilian embezzling money and bringing it to Nigeria. Yet, when we dupe the Nigerian Customs Service or collect bribe from Siemens, most of the money ends up abroad -not even here to oil the wheels of economic progress. Currency round-tripping, a crime of those well taught in market economy, ends up depositing money elsewhere.

That is why Scotland Yard is on the tail of the elite not the common man. Invariably, the model the technocrats have been imposing on Nigeria since the 1970s is one that would work well in a disciplined society and certainly not in a highly corrupt country where the corruption starts at the top and works its way down.